|
There
must be strong grounds for supposing that the independent expert appointed
to provide a report in respect of a proposed Financial Services Markets
Act 2000 ("FSMA") Part VII transfer of insurance business
has mistaken his function or made an error before a challenge to the
report can be mounted.
Pursuant
to s.107 of FSMA the Court's sanction was sought to a scheme for the
transfer of certain general insurance business between companies in
the Zurich Insurance Group. An individual, Mr Birch, and two US corporations
appeared at the sanction hearing. An adjournment was sought for the
purposes of assembling expert evidence to comment upon or perhaps challenge
the independent expert's evidence. The principal issue was identified
as the adequacy of capital retention by Eagle Star, one of the transferees.
S.109 of
FSMA provides that any sanction application under s.107 must be accompanied
by a report on the terms of the scheme. This scheme report may only
be made by a person appearing to the FSA to have the skill necessary
to make a proper report and who has been nominated or approved for that
purpose. The scheme report must be in a form approved by the FSA.
The independent
expert's conclusion, having submitted an initial and supplemental report
and after reviewing the financial security offered to policyholders
retained or transferred, was that the financial security available to
policyholders after the proposed transfers was at least as favourable
as that offered prior to any transfers. Accordingly, the transfers would
not have a material adverse impact on policyholders.
It was
contended that the Court should take steps to enable the independent
expert's report to be tested, and that it was contrary to the basic
requirement of fairness in litigation that a bona fide objector should
be shut out from a chance to show that the report was inadequate. For
Mr Birch it was suggested that this extend to resources being made available,
by way of a per emptive cost Order or similar, to enable him to carry
out rudimentary enquiries for the purposes of assisting the Court in
discharging its functions when considering the scheme.
Pumpfrey
J considered that the arguments advanced over-looked the independent
character of the independent expert and of the report. Although the
transferors paid for the report, the expert had to be approved by the
FSA and produced a report in the form satisfactory to the FSA. The FSA
provides extensive guidance in respect of business transfers, the contents
of the report and matters upon which the expert should express an opinion.
The Institute of Actuaries also issues detailed guidance on the contents
of a formal report covering the actuarial aspects of any general insurance
undertaking.
The independent
expert's report is intended to be an objective assessment of the scheme.
Where problems with a particular scheme are identified but, on satisfactory
grounds, rejected, Pumpfrey J considered that more than the normal requirement
to give an opponent the opportunity to impugn the report is required
before permitting that opponent either to see the expert's detailed
workings or to instruct a further expert. There must be strong grounds
for supposing that the independent expert has mistaken his function
or made an error before a challenge to the report can be mounted. This
was subject to the qualification that the Court retains the right to
reject actuarial calculations based upon manifestly unreasonable forecasts.
Pumpfrey
J held that this was far from the case on the facts before him and sanctioned
the scheme.
|